Stock remain nervous over Iraq crisis

The Jakarta Post, Jakarta

As a possible war in Iraq becomes increasingly imminent, uncertainty will continue to cast a shadow over the local equity market's performance this week, putting the Jakarta Composite Index under familiar pressure, an analyst has said.

The index will remain depressed this week amid gloomy sentiment, after the U.S. stepped up pressure to take military action against Iraq, a Jakarta-based dealer said.

"A war seems to be certain after the U.S. and its allies urged the UN to set a deadline for Iraq to disarm itself or otherwise face military strikes," she told The Jakarta Post on Sunday.

Over the weekend, the U.S., Britain and Spain proposed a new UN resolution that sets a March 17 deadline for Iraq to come to terms with disarmament demands.

"This has sent negative signals to markets across the world, including Jakarta, which has been depressed for some time," she added.

The index in Jakarta closed last week at 389.79 points, a drop of about 2.5 percent compared to the previous week, with daily volume averaging 246.35 million shares, worth Rp 178.18 billion (US$20 million), compared to the average of 205.66 million shares, worth Rp 154.65 billion, the week before.

If the war fears materialize, markets across the globe would be negatively affected as it would delay a rebound in the world's economy or worse, send it into another round of global recession.

Analysts said the impact on Indonesia would be much worse as the military strikes would likely prompt street protests here by various quarters, including ones carried out by radical movements.

This would only shake investor confidence, which in turn would eventually sink the index further.

Indonesia, the world's largest Muslim country, has been hit by waves of anti-U.S. rallies over the last couple of years.

In late 2001, following the U.S.-led attacks on Afghanistan, anti-U.S. rallies flourished. Several foreign firms also had to temporarily stop operations in response to threats of "sweepings" made against U.S. interests.

Turning to the currency market, progress in Iraq will also dominate the issue for the rupiah this week.

Dealers have said that, for now, the market is focusing its attention on the worsening U.S.-Iraq conflict. They expect the local unit to hover between Rp 8,875 and 8,950 against the dollar this week.

The local currency ended last week's trading at Rp 8,880 to the dollar, relatively unchanged from Rp 8,890 the previous week.